Industry Assets Grow Slightly In ’09 Amidst Attrition

Mar 31 2010 | 2:35am ET

Despite posting one of their best years in history, the number of hedge funds—and the number of firms managing them—declined last year, according to PerTrac Financial Solutions.

The research firm’s annual hedge fund database survey found that 500 hedge funds either ceased to be or ceased reporting to hedge fund databases last year, most the former. There were also 350 fewer hedge fund firms in 2009 than 2008, managing the reduced number of 14,650 funds.

The news was not all bad: Thanks to strong performance last year—the average hedge fund returned approximately 20%—the hedge fund industry grew by 5.5% to $1.41 trillion. But that growth was, alas, entirely due to performance: The industry actually suffered a slight net outflow on the year.

But many of the fund closings and much of the redemption activity took place early in the year, as the industry continued to reel from a brutal 2008.

“It appears the hedge fund industry has hit rock bottom and is starting to come back,” PerTrac’s Meredith Jones told Dow Jones Newswires. “We’re kind of making the turnaround to some sort of ‘V’- or ‘U’-shaped recovery for the hedge fund industry.”

Funds of hedge funds have proven a good deal less lucky. Last year, about 60% of industry assets were managed directly by hedge funds and 40% through funds of funds. A year earlier, those figures were almost precisely reversed.


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